Nano-materials are very small with dimensions typically in the range 1 – 100 nanometres, and used for optical and electrical applications. Quantum dots, meanwhile, are a subclass of nano-material with size-dependent optical and electronic properties. Nanoco makes them for use in displays, lighting and biological imaging because they can be tuned to emit light at different wavelengths across the visible and infrared spectrum.

A long haul in research and development

The company has been around since 2001, suggesting that research and development activity has also been going on a long time. But the fruit of its labour is “a world-class, patent-protected IP portfolio generated both by its own innovation engine, as well as through acquisition.” It also has non-exclusive manufacturing and marketing licensing agreements in the area of display products with The Dow Chemical Company, Merck KGaA of Germany and Wah Hong Industrial Corporation of Taiwan.

Revenues capable of generating profits remain elusive, although today’s full-year results show some progress with the figures. Revenue more than doubled to £3.5m compared to the year before, and billings increased to £6.5m, compared to £1.1m the prior year. There was still a loss after tax of £6m in the period, albeit down from more than £9m last year. The directors said that £1.5m was saved on costs and they have contingency plans to reduce costs further and save cash if there are further delays to commercial revenue streams. Right now, they think commercial revenues will crank up in the first half of 2020.

No-one knows if sufficient cash from operations will roll in before the money in the bank runs out. The company raised a net £7.9m from the stock market in November 2017 and said its cash position stands close to £10m, which it thinks will last until operational cash inflows pick up in 2020. If the income is not as high as expected, or if more delays materialise, I think we should expect another fund-raising event down the road.

On the cusp of commercialisation?

Yet, I find it reassuring that other stakeholders have some skin in the game. In the area of nano-materials for the electronics industry, an undisclosed US company bunged Nanoco £2.6m in milestone payments and fees relating to material development and supply agreements. The US company also made an advance payment of £2.9m, discounted against future product sales so that Nanoco can develop new manufacturing facilities in Runcorn.

Chairman Dr Christopher Richards said in the report said that “some potentially very attractive” commercial opportunities have emerged in the short term. He said the firm is “actively engaged in potentially transformative technological and commercial activities.” 

Although the long-term outlook appears to be positive, the directors are preparing for the possibility of delays in the commercialising process, which sounds like a pragmatic tactic. The share price has been weak, but I think Nanoco is one to keep a close eye on because it could be on the cusp of a commercial breakthrough. We’ll find out more over the next year or so.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I wasn’t previously familiar with quantum dots. They’re “fluorescent semiconductor nanoparticles” that are typically around 1/1000th the width of a human hair. They absorb energy from light and re-emit the colour in a different colour. They can be used in LCD displays such as computer monitors and televisions to provide vivid, bright colours.

Unfortunately many quantum dots contain cadmium, which is a heavy metal that’s apparently a proven carcinogen. Regulatory pressure to reduce the use of heavy metals in electronics is growing, so Nanoco has focused on developing cadmium-free quantum dots. I’d imagine that demand for this technology could rise rapidly, if it’s commercially successful.

About to hit the big time?

Nanoco published its half-year results this morning. The group reported good progress on several fronts. The company now has “an increasing number of Nanoco-equipped display products moving through to commercial production with customers in Asia”.

The first commercial products using the firm’s technology are expected to reach the market in 2018, so the company could soon start to receive revenue for commercial sales. Analysts expect the group to make a loss of £6.4m on £6.1m of revenue in 2018. In 2019, Nanoco is expected to make a profit of £12.4m on £24.1m of revenue.

To bridge the gap before sales revenue is expected to start flowing, Nanoco completed an £8.6m fundraising in October. Based on the firm’s H1 cash burn of £4.5m, I believe this could be enough to see the business through to break-even.

Should you buy Nanoco?

Consensus forecasts for 2019 put the firm’s shares on a forecast P/E of 15. That seems quite modest, but it’s worth remembering that we don’t yet know how well Nanoco products will sell in the market.

This is too speculative for me, but if you’re comfortable with the risk, I’d continue to hold the shares following today’s figures.

One stock I would buy

I prefer to invest in companies that are already profitable and delivering sustainable growth. One of my favoured stocks in the tech sector is network technology testing and analytics group Spirent Communications (LSE: SPT).

The group’s recent full-year results showed that 2017 was a successful year, despite some customer delays in the US. Adjusted operating profit rose by 27% to $58.9m, while adjusted earnings were 43% higher, at 7.55 cents per share.

Adjusted operating costs were cut by $16.7m, which helped to lift operating margins to 13% and double free cash flow to $56.4m.

Looking ahead at 2018, the outlook remains strong. Consensus forecasts suggest that the group’s earnings will rise by 10% to 8.3 cents per share this year, and then by a further 20% to 10 cents in 2019.

These projections put the stock on a 2018 forecast P/E of 21. The group’s dividend policy suggests to me that a payout of about 4 cents per share is likely this year, giving the stock a forecast yield of around 2.2%.

This isn’t a cheap stock, but it’s one I’d be happy to buy for long-term growth. However, Spirent’s share price has been quite volatile over the last few years. I suspect the best trading strategy here is to buy on the dips.

The post 2 growth stocks that could crush the FTSE 100 in 2018 appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The share price had slumped at the time, and by market close Wednesday we’d seen a fall of more than 60% since a peak in July 2017.

But Thursday saw a 50% spike, with the price reaching 36.5p in morning trading, after the company revealed it has signed a supply and development agreement with an as-yet-undisclosed US company.

Nanoco said the deal means it “will scale-up and mass-produce novel nano-particles for advanced electronic devices and supply them from its state-of-the-art production facility in Runcorn, UK.“

Expanding the Runcorn facility to cope with the quantity of materials needed will require capital expenditure, and the contract partner will contribute.

Turning point?

These are obviously still early days, but with commercial supply expected to begin in early 2019, it’s looking like a serious stream of cash really might not be too far in the future now. Liquidity was always going to be a key issue as it is with any ‘blue sky’ growth company — even if it’s successful, early investors can still be diluted out, depending on how much cash needs to be raised to reach profitability.

Some of that worry has now been lifted, especially as today’s news comes on the back of a couple of earlier agreements. 

With Nanoco having net cash of £5.7m at 31 July 2017, and a placing having raised an additional £8m late last year, I’m cautiously optimistic.

Multibagger

Shares in Elektron Technology (LSE: EKT) have had a better time, trebling in two years to 23.5p, with Thursday’s full-year trading update providing a small boost.

The cloud-based technologist reported a 10.9% rise in total sales for the year.

Checkit, which “continues to make progress with its real-time operations management product suite,” brought in a 66.7% rise in sales. That is the firm’s smallest unit, though, with just £0.5m in sales, but Elektron’s biggest business seems to be performing solidly too — sales of £27.3m from the Bulgin arm amounted to a 13.3% rise.

The only sales downside came from IMC, with a 12.9% fall to £2.7m.

Orders received during the year amounted to £33.1m, up 17.8%. Net cash rose from £1m at 31 January 2017 to £5.1m a year later, though that does include £1.9m from the disposal of Sheen Instruments, Digitron and Titman Tip Tools.

Should we buy?

Elektron told us its order book for the new financial year currently stands at more than £9m, which looks like a healthy start. And its disposals, it says, enable it to “focus solely on the businesses which the board believes offer greatest potential for growth.”

The problem is, it’s difficult to value the shares right now, as the company appears to be just on the point of turning a profit. Results for the first half showed an operating profit of £0.1m (from a loss of £1m a year previously), and positive EPS of 0.1p (from a loss of 0.6p). 

I’d want to see full-year results, and maybe one more year’s worth, in order to put some meaningful fundamentals together. For now I’m on the fence.

The post Is Nanoco Group plc a small-cap growth stock to buy after soaring 50% today? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

On the other hand, I concluded that if no deals emerged, it “may be a sign” that the firm’s technology is “not worth paying for,” which would be bad news for investors and the firm’s outlook. 

Six months on and it looks as if Nanoco’s outlook has improved significantly, although the company still has plenty of work to do.

Moving forward 

Since April, it has received two substantial orders. The first came from Wah Hong Industrial Corporation, one of the world’s largest manufacturers of optical films and sheets for the display industry, for the supply of resins containing Nanoco’s cadmium-free quantum dots. And the second commercial supply order came from a medical devices firm. The products will be used in light therapy products for the treatment of pain, soft tissue injury and dermatologic conditions. 

So Nanoco is making progress and management believes that the company’s outlook is improving, albeit at a slower rate than expected. New products in the pipeline should help fuel further order growth and recently-signed contracts should help spread the word about the firm’s product offering. 

Still, despite the company’s steady progress, revenue and income remain elusive. More importantly, cash is in short supply, and yesterday Nanoco announced that it was going to conduct an £8.6m fundraising at 18p per share, a discount of approximately 35.7% to the closing mid-market price of 28p per share on 3 October. After this cash call, existing investors will have been diluted by around 20%. 

This fundraise and dilution is disappointing, but it shouldn’t have come as a surprise to investors. Even though City analysts are forecasting revenues of £1.5m for the fiscal year ending 31 July, growing to £6m for the following year, losses are projected for the next two years at least. For fiscal 2018, analysts are expecting the company to lose £6m, consuming two-thirds of the recent cash call. 

And with no profits projected for the next few years, it’s challenging to try and place a value on shares in Nanoco. Even though the company has managed to ink some orders for its quantum dots products, the business is in its early stages and therefore not suitable for most investors. 

Indeed, there’s no guarantee that yesterday’s cash call will be the last one and investors should prepare for more dilution as this small-cap builds out its operations. 

The bottom line 

So overall, even though Nanoco has made some progress over the past few months, the company has a long road ahead of it. There’s also the risk of further dilution from share placings. 

Personally, I’d like to see positive cash generation from the business before buying, as well as more sales contracts. 

The post Is Nanoco Group plc a falling knife to catch after dropping 40% this year? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

For the first half, the company reported a pre-tax loss of £6.4m on revenue of £680,000, worse than a loss of £6.3m on revenue of £140,000 a year ago. These results, while bad, were as expected. But the company also announced alongside results that sales for the second half had not yet materialised, which is something neither management nor City analysts were expecting.

Another blow 

This is yet another blow for Nanoco’s shareholders. The Quantum Dot manufacturer has consistently missed forecasts and expectations for the past four years. Since the beginning of 2013, shares in the company have slumped from a high of 189p to a low of 29p as printed this morning, a total loss of around 85%.

Still, despite the disappointments of the last few years Nanoco’s management remains upbeat and today told investors that the group will undertake a reorganisation of its operations and slash costs if sales continue to remain elusive. The company is expecting the first commercial sales of its products in the remainder of the fiscal second half and will adopt measures to reorganise the business if these sales do not materialise. 

Nanoco has said it is in extensive discussions with nine original equipment manufacturers regarding 14 projects and expects a number of these to convert to sales. Luckily, the firm has enough cash to help it through these tough times. At the end of January, the group had cash and cash equivalents of £8.3m, compared to £18.3m a year earlier.

Growth ahead? 

Even though the business has racked up disappointment after disappointment, Nanoco is well placed for growth and has some significant names supporting the company. 

It has non-exclusive manufacturing and marketing licensing agreements with The Dow Chemical Company, Merck KGaA and Taiwan’s Wah Hong Industrial Corporation. However, even though Nanoco has some big names supporting the business, the sales figures don’t lie and the fact that the firm is struggling to sign up customers is a big red flag. 

With this being the case, the next three months will be crucial for the enterprise. If it can sign a wave of deals with equipment manufacturers, as management believes it can towards the end of the company’s fiscal H2, then we will have more colour on the group’s growth potential. On the other hand, if sales remain elusive it may be a sign that perhaps its technology is not worth paying for, which would be yet another round of bad news for investors.

The bottom line 

Overall, Nanoco is a high-risk investment. A lack of sales is worrying, and as of yet, there’s no telling how big the market is for the company’s products. Moreover, if no sales emerge in the next few months, Nanoco’s outlook is bleak.

The post Is Nanoco Group plc a falling knife to catch after dropping 20% today? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The stock has given back some ground after hitting seven-and-a-half month highs earlier today, but Communisis remains 4% higher from Wednesday’s close.

The firm — which provides marketing and communication services across a variety of channels — announced that it had been awarded a contract to provide all outbound customer communication for Her Majesty’s Revenue and Customs (HMRC).

The deal, which runs for an initial three years from mid-2017 with a two-year extension option, is deemed a significant one as HMRC sends out a staggering 185m letters every year. Communisis added that the contract “also includes the deployment of document composition technology.”

HMRC joins the long list of large private and public sector entities that rely on Communisis’s marketing expertise, the small cap also counting blue chips like Barclays, Legal & General and Centrica amongst its many clients.

And Communisis is investing huge sums to expanding its global footprint and bolster its relationships with the world’s largest companies as well as to attract new custom. The firm now sources around a quarter of total sales from foreign marketplaces, up from 18% at the mid-point of 2015.

Communisis is expected to follow a 13% earnings advance in 2016 with a 6% rise in 2017. This results in a P/E ratio of just 6.5 times, well below the ‘bargain basement’ watermark of 10 times. Meanwhile, a predicted 2.5p per share dividend for next year yields a market-smashing 6.1%.

I believe these figures provide plenty of scope for Communisis’s share price to keep on charging.

Screen star surges

Like Communisis, quantum dot manufacturer Nanoco (LSE: NANO) has also seen its share price shoot higher on Thursday. And an 8% rise has taken the stock away from recent 11-month nadirs.

The Manchester-based business announced that production partner Wah Hong, which produces Nanoco’s CFQD Fine Color film for use in televisions, is planning to ramp up production prior to the product’s unveiling at the CES consumer electronics show in Las Vegas next month.

Nanoco advised that “based on high market demand and rapid progress to date, Wah Hong has decided to bring forward by 12 months its planned investment in a further film coating production line.”

“The new line is expected to be operational by the second quarter of calendar year 2017 and will allow Wah Hong to supply film for display screens of up to 100 inches,” the company added.

And Nanoco provided further cheer by advising that its own production and supply processes had received ISO 9001:2015 certification, a development the firm describes as “significant as it provides reassurance to both major and specialist customers that the company’s quality systems are robust.”

Nanoco’s high-tech products clearly have huge growth potential, and the business is making all the right moves to bolster its manufacturing base and service this strong demand.

Having said that, Nanoco has been knocking around for some time now and is still yet to generate profits growth. And the City does not expect the firm to snap into the black just yet, with losses of 3.1p per share chalked in for the period to July 2017.

I reckon Nanoco may be an unsuitable stock pick for less-patient investors.

The post Can Communisis plc and Nanoco Group plc keep shooting higher? appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Troubled publisher

Johnston Press (LSE: JPR) shares fell 9.5% in morning trading to 12.7p, and are now down a bone-jarring 97% since early March 2014. What’s gone wrong and are we looking at an oversold share that we should be buying?

The publisher has been recording pre-tax losses for several years, and hopes are pinned on the acquisition of the i newspaper in April — but it could be a tough task to get its net debt down to manageable levels. At the interim stage, in which the company spoke of continued “challenging advertising trading conditions,” that debt stood at £137.7m. That’s a significant reduction from the £146.1m level at 2 January, but still a lot for a company with a market capitalisation of only £13m and a six-month adjusted pre-tax profit of just £12.3m.

Johnston is in negotiations with its lenders, and has agreed some changes regarding a currently unused £12.5m facility, but it’s had to postpone a test of its lending covenant, which was due in September, to 31 December.

Forecasts put Johnston shares on a P/E of under one, though net debt that’s more than 10 times the value of the company would seem to account for that very low valuation. The questions now are whether the firm can pull itself out of the mire, which would presumably need a new financing round, and what value would be left for existing shareholders at the end of it?

Those are hard questions to answer and there could be a profit in it, but there’s too much risk for me.

Big profit from small things?

Nanoco (LSE: NANO) had a bad morning too, shedding 8.5% to 58.7p, after the firm deferred the accounting of some licence fee revenue — although it says it doesn’t affect its cash situation.

Nanoco, a maker of cadmium-free quantum dots (which are used for making high quality displays), saw its shares climb on rumours in advance of an agreement with Merck that was announced on 1 August (Merck will market Nanoco’s stuff to its own customer base) but that follows a longer-term decline.

After a 68% share price fall since February 2013, is Nanoco a tempting buy? On the upside, the company is clearly making good things for which there should be strong demand, and it might only need a few more deals to see its prospects improving dramatically — a trading update in August told us of significant commercial and technological advances.

But against that, we still have losses forecast for this year and next, and net cash stood at a modest £14.4m at 31 July (down from £18.3m at 31 January). Revenues for this year (unaudited) are said to be £1.9m, which isn’t insignificant, but it’s less than 2015’s £2m — and that cash pile surely can’t last much longer at the current rate unless revenue is hiked soon or new funding is sought.

Nanoco is clearly a risky investment, but it has the potential to turn into a winner in the relatively short term. I’m cautiously optimistic, though I think the next 12 months could be critical.

The post Should you buy these two big fallers today? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Enterprise Inns

Pub chain Enterprise Inns (LSE: ETI) came close to going bust during the financial crisis, thanks to net debt which peaked at well over £3bn. Enterprise’s net debt is now down to £2.3bn and the firm’s shares trade on a forecast P/E of just 5.4. Is there hidden value here?

Possibly.

The group’s property assets are valued at £3.7bn. Yet the total value of Enterprise’s equity and its net debt it just £2.8bn. In theory, this means that a trade buyer could buy the entire Enterprise business for 24% less than the value of its property assets.

However, while net debt is falling, so is the value of Enterprise’s property portfolio. For Enterprise shares to deliver on their hidden value potential, net debt needs to fall faster than the value of the group’s property portfolio.

In other words, Enterprise’s loan-to-value ratio needs to improve. So far, it’s fallen from 66% in 2010 to 62.7% in 2015. It’s a promising start, but progress may be slow.

Tesco

Another firm with a big property portfolio and a large pile of debt is Tesco (LSE: TSCO).

The recent sale of Tesco’s Korean business means that Tesco’s net debt and the value of its property portfolio have fallen since the firm’s half-year results.

My calculations suggest that Tesco’s net fixed assets, which include property along with other long-term assets such as investments, may now be worth about £21bn. I estimate that the firm’s net debt may now be around £7bn.

As with Enterprise, we can look for hidden value by comparing the value of Tesco’s fixed assets with its enterprise value (market cap plus net debt). I estimate that Tesco’s enterprise value is currently about £21bn, equivalent to the value of its net fixed assets.

This means that unlike with Enterprise, there is no obvious hidden value in Tesco’s portfolio of property and investments.

With a 2016/17 forecast P/E of 19, Tesco stock doesn’t look cheap against forecast earnings, either. However, I don’t see any obvious reasons for the shares to fall further, so now could be a good time to start thinking about a recovery buy.

Nanoco Group

Nanotechnology small-cap Nanoco Group (LSE: NANO) is not an obvious value buy. The firm makes quantum dots and nanoparticles for use in technology such as LED displays and solar panels, but has yet to make a profit.

However, Nanoco has net cash of £24m and moved from AIM to the LSE Main Market earlier this year. The group also has some high-powered institutional investors, including Henderson Global Investors (17%) and Baillie Gifford (14%).

After years of waiting, there is now a big potential catalyst for share price growth. Commercial production of Nanoco technology by the group’s licensing partner, Dow Chemicals, is expected to start during the first half of 2016

Analysts’ forecasts suggest Nanoco could report earnings per share of 3.08p in 2016/17. That puts the shares on a forecast P/E of 16 — not expensive for a high-tech growth business.

Nanoco shares are down by 65% so far this year. Although this remains very speculative, now could be a smart time to buy.

The post Is There Hidden Value In Tesco PLC, Nanoco Group PLC & Enterprise Inns plc? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Tesco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Tremendous opportunity

Interestingly, the company is also diversifying into other areas and has tremendous opportunity to benefit from the planned rise in the ‘Internet of Things’. This could provide the company with renewed growth opportunities, since there have been concerns raised among investors that ARM is becoming a more mature business which will aim to increase dividend payments in future.

While this is true in some respect, with ARM expected to raise the amount it pays to its shareholders by 22% this year, its earnings growth potential remains very high. This year its bottom line is set to rise by 66%, while next year the figure is 14%. Therefore, further capital gains appear to be on the cards over the medium term.

Bright future

Similarly, Diageo (LSE: DGE) also has a bright future, looking set to benefit from the increasing prevalence of middle class consumers in China and the rest of the emerging world. In China, the incomes of urban dwellers are forecast to rise rapidly in the next five years, with up to three-quarters of them expected to be earning above $9,000 per annum by 2020. This, alongside continued growth in demand for premium spirits in other key markets such as India, indicate that Diageo’s bottom line could be boosted by improving external factors.

Clearly, Diageo has been a disappointment this year. Its shares are up by just 1% since the turn of the year. However, it has considerable capital gain potential due to its growth prospects and, with its shares trading on a price to earnings (P/E) ratio of 20.9 (which is lower than many of its global consumer peers), there is clear upside potential over the long run. Additionally, with a bid for SABMiller having already taken place, the global beverages industry may experience a period of consolidation which could have a further positive impact on Diageo’s share price.

Worth watching

Meanwhile, shares in display and lighting technology company Nanoco (LSE: NANO) are up by almost 10% today on no significant news flow. Its most recent results showed that its pretax loss had widened versus the same period in the prior year, with it increasing to £10.9m from £9.1m in the previous full-year. This was due to higher operating costs as well as exceptional costs linked to its move from AIM to the main market during the year.

Furthermore, with delays in customer sampling expected from its manufacturing plant in South Korea, the recurring revenue from the plant is now expected to be delayed until later on in the current financial year. As such, and with Nanoco expected to remain in the red in the current year, it appears to be a stock worth watching rather than buying at the present time.

The post 3 Stocks To Make You Rich? Diageo plc, ARM Holdings plc And Nanoco Group PLC appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Very tiny

Nanoco Group (LSE: NANO) is an intriguing proposition. To quote the company itself, “Nanoco leads the world in the research, development and large-scale manufacture of heavy-metal free quantum dots and semiconductor nanoparticles for use in displays, lighting, solar energy and bio-imaging“.

The company has a patented technology for making these little doodahs on a large scale, and the demand for the LCDs in which they’re used can surely only grow — especially as rules restricting toxic heavy metals are imposed.

Now, Nanoco is not expected to record a profit until July 2016, with forecasts suggesting a P/E of 65 for that year on today’s 109p share price — and there are quite a few shorters out there. I wouldn’t buy right now, but I’ll be examining this year’s results.

Biotech

Proteome Sciences (LSE: PRM) develops protein and peptide markers for clinical use, including the diagnosis of things like Alzheimer’s, stroke and cancer. That’s clearly a technology with great potential, but again we’re looking at a company that’s not yet in profit.

Results for 2014 released in May showed a 9% rise in revenue and told us of “strong underlying growth in biomarker services“. And though the year ended with a post-tax loss of £3.6m, chairman Christopher Pearce said he expects to see “strong growth in revenue and news flow in 2015“. With no profit forecast yet it’s hard to value the 27p shares, but Proteome is worth keeping an eye on.

Watching

Vislink (LSE: VLK), a company that develops advanced video technology for the media, law enforcement and defence markets, has not grown as quickly as some earlier investors had hoped. But at 60p the shares have still trebled in five years and have gained 32% in the past 12 months. After a steady climb since the start of 2015, could we be heading for a golden period?

Vislink recorded its first profit in 2012, and by 2014 it beat expectations with an adjusted operating profit of £7.2m from revenue of £61.9m — and paid a decent dividend too. At the time of the report in May, chairman John Hawkins reckoned that 2014 had been “a transformation year“. And with forecasts putting the shares on a P/E of 12.5 this year, dropping to 11.4 next, there might be a transformation in investors’ rewards, too.

The post Are Nanoco Group PLC, Proteome Sciences plc And Vislink plc Heading For The Big Time? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.